Accurately establishing and supporting the value of a business or intangible asset requires a strong foundation in valuation theory and deep experience in its application. Further, when a valuation is required in the context of a litigation dispute, added expertise in forensic accounting is often necessary to establish the factual components of the analysis through expert testimony.
The Hemming Morse valuation team is comprised of highly credentialed experts who possess extensive knowledge and experience in performing valuations of businesses and their assets both in the dispute setting and otherwise, such as in the context of transactions and financial reporting. Often, due to the complex nature of the disputes in which our clients are involved, our experts are called on to go beyond the traditional valuation exercise by incorporating forensic accounting techniques to the assignment, such as when the revenues or profits of the entity in question may be inaccurate as reported. Accordingly, our expertise in valuation, coupled with our deep experience in accounting, allows our experts to provide high-quality opinions on business value and to credibly explain and defend such opinions through expert testimony.
Valuation of Failed Company in Employee Class Action
A group of employees terminated by a timber and forest products company brought a claim against the company. The company established an Employee Stock Ownership Plan (ESOP), to which the company’s sole shareholder had sold a significant portion of his shares based on a business appraisal prepared in connection with the ESOP transaction.
The company raised the funds to purchase the shares through a bank loan. Subsequently, the company struggled to pay its debt service and other obligations, and eventually failed. As a result, the employees were terminated and their ESOP shares became worthless.
Hemming Morse investigated the appraisal and sale to start the ESOP, to assist in determining whether the alleged wrongful transaction had harmed the plaintiff employee group.
Business Valuation in Antitrust Matter
A large forest products manufacturer was sued by several small lumber producers who alleged that the defendant had violated antitrust laws by manipulating log costs to drive its competitors out of business. Hemming Morse analyzed the plaintiffs’ financial books and records to determine if they supported these allegations. Further, the team investigated the alleged lost business value of the plaintiffs, who claimed to have been driven out of business as a result of the defendant’s alleged wrongdoing. The appraisal was based on claimed profits that were calculated using accounting and financial statements that the Hemming Morse team challenged, based on a thorough inquiry of the accounting that had been used in the company, in the industry, and as called for by Generally Accepted Accounting Principles.
Valuation of a Resort Hotel/Condominium
Hemming Morse calculated the damages suffered by the owner and developer of a resort hotel and condominium project on the island of Guam. The mixed-use facility was not constructed in accordance with the approved plans, and shortly after its completion Guam suffered a severe earthquake. Due to the faulty construction, the building collapsed, and it was condemned by the government. Hemming Morse calculated the value of the resort facility based on the income approach, considering the likely future benefit stream, discounted to present value at an appropriate discount rate.